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UNCLAS SECTION 01 OF 03 ANKARA 005306
SIPDIS
SENSITIVE
VIENNA PASS TO SECRETARY ABRAHAM DELEGATION
E.O. 12958: N/A
TAGS: EPETEWWTEMINETRDEINVOVIPTU
SUBJECT: SECRETARY ABRAHAM'S SEPTEMBER 21 VISIT TO ISTANBUL
- SCENE-SETTER
Sensitive But Unclassified. Please Handle Accordingly.
¶1. (SBU) Your visit to Turkey comes a few months after the
President,s June visit to Ankara and Istanbul for bilateral
meetings and the NATO Summit, at a time when bilateral and
political relations are generally on track. Your meeting
with Energy Minister Hilmi Guler will provide an excellent
opportunity to enhance bilateral energy cooperation and to
promote Turkey as a hub in the East-West Energy Corridor.
The Embassy and Consulate are working with Turkish
authorities and businesspeople to arrange a tour of the
Bosphorus to acquaint you with transport, environment, energy
and political issues surrounding use of that congested
waterway.
Notional Program
----------------
¶2. (SBU) We are working with the GOT to arrange a program for
you in Istanbul on September 21. This will start with a
bilateral meeting at the Istanbul Airport with Energy and
Natural Resources Minister Hilmi Guler, followed by a joint
press availability session. The Consulate will arrange a
luncheon and tour of the Bosphorus, most likely to be hosted
by the American Business Forum in Turkey (ABFT) and the
Turkish-U.S. Business Council of the Foreign Economic
Relations Board (TUSBC). Separately or as a part of this
event, you will be able to meet with Turkish and American
energy business people and Turkish government officials. The
Consul General plans to participate in your program, but the
Ambassador has a previous commitment in Ankara. Our Istanbul
Consulate control officer Stuart Smith will be in contact
with your staff as we firm up these arrangements. Embassy
Energy Officer David Young will also assist and will be your
note-taker.
Overview of Bilateral Relations
-------------------------------
¶3. (SBU) The June NATO Summit highlighted Turkey,s role in
the alliance, in European institutions and in the Broader
Middle East and North Africa Initiative. Bilateral political
relations have improved in the eighteen months since the
Turkish Parliament,s March 1 vote on Iraq, with good
cooperation on a host of issues. On Iraq reconstruction,
Turkey has become a major supplier of the Multinational
Force- Iraq, bilateral trade is booming, and Turkish
contractors have won a considerable share of reconstruction
contracts. Turkey shares our goals of democratization,
market-based reform and integration with the world economy
for the Middle East. The GOT worked hard to reach a
resolution of the Cyprus issue and it has continued on the
path of political reforms in the hope of gaining a date for
the start of the EU accession process this December. Turkey
remains very concerned about instability and insecurity in
Iraq, particularly related to recent Turkish truck driver
kidnappings, Iraq-based PKK terrorist presence, and recent
action in the predominately Turkmen-populated northern Iraqi
city of Talafar.
¶4. (SBU) Political: With a two-thirds majority in
parliament, control of a majority of municipalities, and no
viable political opposition, PM Erdogan and his AKP
government have appeared in control. AKP,s passage of major
legal reform packages and constitutional amendments appears
to have put Turkey more firmly on track to get a
harmonization start date from the EU in December, although
chronic problems with implementation continue to plague the
government. Moreover, the EU remains concerned at the GOT's
resistance in trying to criminalize adultery. In his
meetings with foreign leaders, Erdogan projects confidence,
power, and a pragmatism that seem to belie his Islamist
firebrand past.
¶5. (U) Economy: The Turkish economy has recovered from the
financial and economic crisis of 2000-2001. However,
Turkey,s huge debt and structural weaknesses leave it
vulnerable to external shocks and necessitate continued
implementation of the IMF program and its accompanying fiscal
restraint, sectoral liberalization and structural reform.
The current AKP Government has made laudable progress on
reducing inflation and interest rates and stabilizing the
currency. Nonetheless, the economy remains fragile, and
continued implementation of reforms is essential to sustain
growth and stability.
The Turkish Straits
-------------------
¶5. (SBU) Turkey is concerned that rising maritime traffic,
especially of large oil tankers, presents a safety and
environmental risk to this unique waterway, which bisects
Istanbul and its population of 12 million. Oil transport has
increased dramatically in recent years: from 60 million tons
in 1997 to 134 million tons in 2003, and companies are using
larger tankers. Turkish officials emphasize that traffic in
the Straits is safe and they continue to work on safety
improvements consistent with Turkey,s obligations under the
Montreux Convention. However, they warn that they are nearing
the maximum safe capacity. For example, tankers over 200
meters face special difficulty managing the sharp curves and
currents in the narrowest sections of the Straits, forcing
them to routinely deviate outside the normal shipping
channel, according to Turkish authorities. Turkey restricts
these tankers to daytime transit and only in one direction at
a time. In 2003, Turkey took delivery of the Vehicle Traffic
System (VTS), constructed by Lockheed Martin, which allows
Turkish authorities to better monitor traffic and respond
more quickly to accidents in the Straits. However, the VTS
will not necessarily mean an increase in traffic, and may
actually reduce traffic, because the authorities will be
better able to enforce vehicle spacing and other safety
regulations.
¶6. (SBU) The congestion, when coupled with bad weather, has
resulted in expensive delays for oil companies and supply
shortages for consuming country refineries. At one point in
early 2004, 42 ships were waiting to enter the straits, with
an average delay of 20 days, costing ship operators hundreds
of thousands of dollars. These delays have led to a renewed
interest in pipeline projects to bypass the Straits, which
Turkey supports. The U.S. and Turkey have worked closely
together to promote the development and construction of the
Baku-Tbilisi-Ceyhan pipeline (oil on schedule to flow by
mid-2005), which will bring oil from the Caspian to the
Mediterranean, bypassing the straits.
East-West Energy Corridor
-------------------------
¶7. (SBU) You may want to take the opportunity to congratulate
the GOT on approaching realization of the Baku-Tbilisi-Ceyhan
as the first Bosphorus Bypass project. This is a huge
success; but, we must work together to insure that
construction in Georgia remains on track. You may want to
highlight continued support for Turkey as an energy transport
hub to Europe and world markets, particularly for natural
gas. You may want to remind Minister Guler of our mutual
support for realization of a commercially feasible Bosphorus
Bypass project. We continue to call for timely action on
bypass permits to allow the market to pick a winner.
¶8. (SBU) You may want to remind the Minister of important
aspects of U.S. policy related to the East-West Energy
Corridor. Two key aspects have been: reducing Russian
dominance in regional oil and gas pipelines and reinforcing
our Iran sanctions policy by providing an alternative to
trans-Iranian lines and Iran-sourced hydrocarbons. You may
want to remind the Minister of our serious concerns about
Iran and encourage him to continue to resist pressure to
import more product from Iran. With respect to Russia, we
encourage Turkey to engage with the Russian government and
companies to address Bosphorus shipping problems and
potential solutions. We would also encourage Turkey to use
its commercial leverage to encourage Russia to be a
transparent partner pursuing greater energy reform. (Note:
President Putin,s visit was postponed. The Turkish press
has reported widely on Russian companies, interest in energy
assets in Turkey (refineries, natural gas distribution, and
pipelines).
¶9. (SBU) Finally, you may want to encourage the Minister to
promote energy opportunities with Iraq, in particular
possible electricity export. A Turkish energy firm currently
exports almost 200 MW. The Turkish pipeline company BOTAS
has been concerned about infrequent oil flow in the
Kirkuk-Ceyhan pipeline. Turkish companies have been awarded
contracts totaling USD 500 million and Turkish exports to
Iraq have grown to more than USD 1 billion in the first half
of 2004. Turkey remains deeply concerned about the security
situation in Iraq, especially related to a series of Turkish
trucker abductions and the subsequent murder of several
drivers. Additional papers have been provided separately to
you on East-West Energy Corridor issues.
Investment Environment and Commercial Disputes:
--------------------------------------------- -
¶10. (SBU) Turkey has had difficulty attracting adequate
foreign investment over the years because of corruption and
perceptions of lack of transparency and inadequate contract
sanctity and enforcement. Efforts to liberalize and
privatize sectors and state companies are underway, but
behind schedule. U.S. companies have been involved with a
number of investment disputes over the years. Enron and
Mission Edison operate Build-Operate-Transfer electric plants
under GOT pricing guarantees, but have faced difficulties in
gaining licenses. Madison/Toreador and TPAO (Turkish Oil
Company) jointly announced discovery of commercial natural
gas in the Black Sea, but the U.S. Company is engaged in
legal disputes over GOT Treasury non-performance under an
exchange-rate guarantee and over adjacent block exploration
licenses. Denver-based Newmont Mining Corporation complains
of GOT arbitrarily withholding operating approval despite
timely compliance with environmental permits. You could
encourage the Minister to seek to resolve these cases and
take steps to improve general investment climate.
Minister Guler
-----------------
¶11. (SBU) Minister of Energy and Natural Resources since
November 2002, Hilmi Guler is reputed to enjoy good relations
and access to Prime Minister Erdogan. He is believed to be
supportive of U.S. concerns about resisting further
agreements with Iran. Guler,s academic and professional
background is in metallurgical engineering, including a
doctorate. He speaks English, but prefers to use an
interpreter.
EDELMAN